CHICAGO—A new survey finds credit union executives believe auto loans will afford CUs the greatest loan growth opportunities in 2015.
The “Elements of Sustainable Growth” survey, conducted by TransUnion, surveyed 142 credit union executives during October. By a 2-to-1 margin, auto loans (46%) were chosen as the top growth opportunity over the next 12 months relative to the next highest rated loan product -- mortgage loans (22%). Nearly 84% of those surveyed ranked auto loans as one of their top three areas for growth.
"While auto loan performance in the last few years has been strong across the board, it is clear that credit union executives continue to value these loans going forward over other growth areas such as mortgages, credit cards and home equity lines of credit," said Ezra Becker, vice president of research and consulting in TransUnion's financial services business unit. "Overall delinquency levels for auto loans remain low and demand for autos is high, so the reasoning makes sense. In the longer term, we might anticipate greater focus on mortgage and HELOC growth as home values continue their upswing, but for now the auto loan is king."
Other Findings
- TransUnion said its data shows that auto loans for subprime consumers have grown by nearly 7% in the last year, from 8.65 million accounts in Q2 2013 to 9.24 million in Q2 2014.
- Delinquency rates (60+ days past due) for subprime auto loan borrowers have increased approximately 11% in this same timeframe, from 4.73% to 5.26%.
- Despite the increase in subprime accounts, it should be noted that the number of subprime auto loans is still low as compared to what was observed in Q2 2008, when there were 11.78 million subprime auto accounts on the books. Delinquency rates for those loans at that time, though, were slightly lower at 5.06%, TransUnion said.
- The survey also found that, despite current low delinquency rates, credit union executives remain prudent regarding member credit risk. Just over half (52%) rated credit risk as one of the top three challenges for credit unions to meet loan growth goals over the next 12 months.
- Additionally, 91% of credit union executives surveyed said competition from large banks, captives and other credit unions was also one of their top three challenges, while 81% of them said regulation could impact their loan growth goals.
- CU execs are aiming for a big picture perspective. Approximately six in 10 credit union executives are at least slightly concerned about their members' student loan debts and HELOC balances with other financial institutions.
- Though challenges may lie ahead, the survey found that membership volumes for most credit unions has increased over the past 12 months. Most credit unions (61%) have seen up to 5% increases in volume while more than a quarter of credit unions -- 27% -- have experienced increases of more than 5%.
- Credit union executives believe they are winning consumer hearts and minds as well. Seven in 10 credit union executives believe they are more capable of competing with traditional banks today than they were five years ago. Nearly 57% of those surveyed believe their capability to compete with traditional banks has improved in just the last year alone.
- TransUnion's survey also broached the relatively new Apple Pay payment platform. More than 13% of credit union executives said they are participating in Apple Pay, while 32% said they have already inquired about participating. Another 19% of respondents said they plan to inquire about participating. More than one-quarter of credit union executives (25%) had not yet formulated a strategy -- likely because the announcement of Apple Pay only occurred recently.
Related links
CUs Going Longer On Auto Terms